The Dollar Gains on the Yen, but Edges Lower Against the Euro
The dollar strengthened against the yen but weakened slightly against the euro as investors awaited U.S. inflation data that could provide insight into future interest rate cuts by the Federal Reserve.
Bitcoin Falls After Social Media Whipsaw
Bitcoin experienced a drop in value after a social media message claimed that the U.S. Securities and Exchange Commission (SEC) had approved bitcoin exchange traded funds (ETFs). However, it was later revealed that the message was unauthorized. The SEC is set to decide on the approval of several bitcoin ETF applications, including those from BlackRock, Fidelity, and VanEck.
Dollar Index Holds Steady
The dollar index has remained stable since Friday’s volatile trading session, which saw an initial jump following strong jobs data in December but later dropped due to soft underlying details of the employment report. The Institute for Supply Management (ISM) also reported a significant slowdown in the U.S. services sector in December, further weakening the dollar.
CPI Data Could Impact Dollar Direction
The consumer price index (CPI) data expected to be released on Thursday will likely influence the direction of the dollar. Traders are anticipating a 0.2% increase in headline inflation for the month and a 3.2% increase on an annual basis. The market is pricing in potential rate cuts by the Federal Reserve in March as inflation eases closer to its target.
Dollar Holds Above Five-Month Lows
Despite expectations of rate cuts, which have already been factored into prices, the dollar has managed to stay above five-month lows reached at the end of December.
Japanese Economic Data Impact Yen
Weaker economic data in Japan may delay the Bank of Japan’s plans to raise rates out of negative territory. Shrinking real wages and slowing core inflation suggest that an April rate hike is more likely than one at the end of this month.
Bitcoin’s Volatility Continues
Bitcoin experienced a 2.18% drop, falling to $45,147. The cryptocurrency briefly reached a 21-month high of $47,897 following the unauthorized social media post about the SEC’s approval of bitcoin ETFs. However, many investors have already priced in the positive outcome from the SEC decision.
Hot Take: Anticipation Fades as Bitcoin Faces Volatility
As anticipation for SEC approval of bitcoin ETFs fades, bitcoin continues to face volatility in the market. While the unauthorized social media post caused a temporary spike in prices, the reality is that most investors have moved on and are now looking for other catalysts to drive bitcoin’s value.
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